Telstra’s Beats Music set to compete with sea of streaming services

Telstra
has admitted music streaming services such as Spotify and iTunes Radio are hitting revenues of its BigPond music download-to-own service – but it is planning an aggressive launch for its new alliance with Los Angeles-based streaming service Beats Music.

The Australian market saw its first casualty in the sector last month with the exit of French player Deezer. But Telstra is pushing ahead with the launch of Beats Music in coming months to compete with the likes of Apple’s iTunes Radio. Australia was the second Apple market in the world after the United States to launch the service last month. There are a string of other services from media companies, in­cluding
Lachlan Murdoch
’s
Nova Entertainment
venture with Rdio.
Nine Entertainment Co
and
Southern Cross Austereo
’s service, Songl, also has record labels Universal and Sony as partners.

“There is an impact [on ­BigPond] when people have a download-to-own service and the delivery changes," Telstra Media’s director, digital media and content,
Adam Good
, told the The Australian Financial Review.

According to this month’s figures from ARIA, music streaming revenues nearly doubled in 2013, making up 5.9 per cent of the total music market in value terms. However, digital download revenue growth slowed and total sales, including CDs, fell 11.6 per cent.

Subscription-based model

Mr Good said Telstra was still backing a subscription-based streaming model with Beats over an ad-funded service like Pandora and iTunes Radio because the latter were more intrusive. “When you look at customers streaming their music and then inserting ads in the middle, we didn’t want to do that to Telstra customers," he said. “We’ve got to be very careful."

Jane Huxley
, managing director of US streaming radio service Pandora, told the Financial Review the service had just passed 1.5 million users across Australia and New Zealand. It started inserting ads into its free streaming service in January from the likes of Mazda, Sonos, Bupa and Samsonite.

“The clickthroughs are incredibly high and we see the earball as our killer ad unit," she said. “That’s been the most effective and popular for us. I don’t think there is room in the market for all the players out there, but we are starting to see this trend to streaming rather than [music] ownership."

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Ms Huxley said when Apple launched its radio service in the US last year, it targeted Pandora, but after losing about 3 per cent of users who trialled iTunes Radio, they had returned.

“Apple threw everything at us in the US," she said. “We saw a small percentage of our active users trial and return in 60 days." Analysts expect streaming will have a negative impact on Apple’s iTunes download-to-own catalogue. Apple launched iTunes Radio in Australia last month with an ad-funded service which has seen Pepsi, American Express, McDonald’s and Harvey Norman as early backers.

“From an advertiser’s point of view, Apple can target users who have an Optus app with a Telstra switch message," said Stu Bailey, head of digital at media buyer OMD. “It’s obviously a very powerful marketing tool, especially when you think about the access Apple has to granular personal-preference data and their ability to overlay micro-targeting and their massive scale."